GST Update

 Desk of CA. Praveen Sharma – 877 Series (CAPS) 

DELHI HIGH COURT IN THE CASE OF Delhi Sales Corporation .

The petitioner approached the Delhi High Court challenging the Order-in-Original dated 21.01.2025 and the DRC-07 demand dated 23.02.2025.

The petitioner argued that the entire tax amount relating to them was already paid way back in August 2022, well before the SCN dated 07.06.2024 was issued.

The impugned order itself acknowledged this payment—showing ?2,07,868 received from the petitioner under the “appropriation” section.

The Department admitted in Court that the petitioner had indeed deposited the said sum, but claimed that penalty was imposed due to their involvement with several bogus supplier entities.

The petitioner relied on Sections 74(5) and 74(8) of the CGST Act, stating that pre-SCN payment extinguishes further penalty proceedings.

The Court examined Section 74 and noted the distinction: Section 74(5) allows voluntary payment before the SCN with only 15% penalty; Section 74(8) applies after SCN with a 25% penalty cap.

Since the petitioner deposited tax and interest in 2022 pursuant to summons, and the remaining penalty component was minimal (around ?19,000), forcing them to file an appeal would be unnecessary.

The Court directed that if the petitioner pays 15% of the penalty within 4 weeks, the SCN and order would stand quashed only for the petitioner, not for other noticees.

Link: CA. Praveen Sharma on Linkedin

Regards
CAPS